| Using Your HSA Does an HSA pay for the
same things that regular insurance pays for?
HSA funds can pay for any “qualified medical expense”, even if the
expense is not covered by your HDHP. For example, most health insurance
does not cover the cost of over-the-counter medicines, but HSAs can. If
the money from the HSA is used for qualified medical expenses, then the
money spent is tax-free.
How do I know what is included
as “qualified medical expenses”?
Unfortunately, we cannot provide a definitive list of “qualified medical
expenses”. A partial list is provided in IRS Pub 502 (available at
www.irs.gov). There have been thousands of cases involving the many
nuances of what constitutes "medical care" for purposes of section
213(d) of the Internal Revenue Code. A determination of whether an
expense is for "medical care" is based on all the relevant facts and
circumstances. To be an expense for medical care, the expense has to be
primarily for the prevention or alleviation of a physical or mental
defect or illness. The determination often hangs on the word
"primarily."
Who decides whether the money I’m spending from my HSA is for
a “qualified medical expense?”
You are responsible for that decision, and therefore should familiarize
yourself with what qualified medical expenses are (as partially defined
in IRS Publication 502) and also keep your receipts in case you need to
defend your expenditures or decisions during an audit.
What happens if I don’t use the
money in the HSA for medical expenses?
If the money is used for other than qualified medical expenses, the
expenditure will be taxed and, for individuals who are not disabled or
over age 65, subject to a 10% tax penalty.
Are dental and vision care
qualified medical expenses under a Health Savings Account?
Yes, as long as these are deductible under the current rules. For
example, cosmetic procedures, like cosmetic dentistry, would not be
considered qualified medical expenses.
Can I use the money in my HSA to
pay for medical care for a family member?
Yes, you may withdraw funds to pay for the qualified medical expenses of
yourself, your spouse or a dependent without tax penalty. This is one
of the great advantages of HSAs.
Can I pay my health insurance
premiums with an HSA?
You can only use your HSA to pay health insurance premiums if you are
collecting Federal or State unemployment benefits, or you have COBRA
continuation coverage through a former employer.
Can I purchase long-term care
insurance with money from my HSA?
Yes, if you have tax-qualified long-term care insurance. However, the
amount considered a qualified medical expense depends on your age. See
IRS Publication 502 for the amounts deductable by age.
I have an HSA but no longer have HDHP coverage. Can I still
use the money that is already in the HSA for medical expenses tax-free?
Once funds are deposited into the HSA, the account can be used to pay
for qualified medical expenses tax-free, even if you no longer have HDHP
coverage. The funds in your account roll over automatically each year
and remain indefinitely until used. There is no time limit on using the
funds.
What happens to the money in my HSA if I lose my HDHP
coverage?
Funds deposited into your HSA remain in your account and automatically
roll over from one year to the next. You may continue to use the HSA
funds for qualified medical expenses. You are no longer eligible to
contribute to an HSA for months that you are not an eligible individual
because you are not covered by an HDHP. If you have coverage by an HDHP
for less than a year, the annual maximum contribution is reduced; if you
made a contribution to your HSA for the year based on a full year’s
coverage by the HDHP, you will need to withdraw some of the contribution
to avoid the tax on excess HSA contributions. If you regain HDHP
coverage at a later date, you can begin making contributions to your HSA
again.
Do unused funds in a Health
Savings Account roll over year after year?
Yes, the unused balance in a Health Savings Account automatically rolls
over year after year. You won’t lose your money if you don’t spend it
within the year.
What happens to the money in a
Health Savings Account after you turn age 65?
You can continue to use your account tax-free for out-of-pocket health
expenses. When you enroll in Medicare, you can use your account to pay
Medicare premiums, deductibles, copays, and coinsurance under any part
of Medicare. If you have retiree health benefits through your former
employer, you can also use your account to pay for your share of retiree
medical insurance premiums. The one expense you cannot use your account
for is to purchase a Medicare supplemental insurance or “Medigap”
policy.
Once you turn age 65, you can also use your account to pay for things
other than medical expenses. If used for other expenses, the amount
withdrawn will be taxable as income but will not be subject to any other
penalties. Individuals under age 65 who use their accounts for
non-medical expenses must pay income tax and a 10% penalty on the amount
withdrawn.
Can I use my HSA to pay for medical expenses incurred before
I set up my account?
No. You cannot reimburse qualified medical expenses incurred before
your account is established. We recommend you establish your account as
soon as possible.
Who will be the “bookkeeper”
for my HSA?
It is your responsibility to keep track of your deposits and
expenditures and keep all of your receipts. If you run out of HSA funds
(and therefore need to use your HDHP), you may need to send those
receipts to your insurer.
How do I use my HSA to pay my physician when I’m at the
physician’s office?
If you are still covered by your HDHP and have not met your policy
deductible, you will be responsible for 100% of the amount agreed to be
paid by your insurance policy to the physician. Your physician may ask
you to pay for the services provided before you leave the office. If
your HSA custodian has provided you with a checkbook or debit card, you
can pay your physician directly from the account. If the custodian does
not offer these features, you can pay the physician with your own money
and reimburse yourself for the expense from the account after your
visit.
If your physician does not ask for payment at the time of service,
the physician will probably submit a claim to your insurance company,
and the insurance company will apply any discounts based on their
contract with the physician. You should then receive an "Explanation of
Benefits" from your insurance plan stating how much the negotiated
payment amount is, and that you are responsible for 100% of this
negotiated amount. If you have not already made any payment to the
physician for the services provided, the physician may then send you a
bill for payment. |
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